During the last year, Canadian Licensed Producers (LPs) have come under heavy pressure and this is a vertical of the cannabis industry that we are highly focused on as we head into 2020.
Although the Canadian cannabis sector has been trending lower, we have seen an improvement from a company fundamental standpoint (on average). Going forward, selectivity will be more important than ever, and we want to highlight an opportunity that has been flying under the radar.
The company, Aleafia Health Inc. (ALEF.TO) (ALEAF) has been executing flawlessly on a multi-faceted growth strategy and we find the risk-reward scenario to be attractive at current levels. Aleafia Health has significant potential catalysts for growth, and we are excited about the way the story has advanced so far this year.
The Canadian cannabis producer is led by a management team that has had its finger on the pulse of the market and we are favorable on the way the team has been able to execute on several important growth initiatives while being highly focused on cutting costs and improving operational efficiencies. We believe that the market does not completely understand the Aleafia Heath opportunity and today, we want to provide an in-depth look into the operation.
Aleafia Health is Reaching an Inflection Point
When looking at Aleafia Health, we see a business that is about to reach a major inflection point and are bullish on this aspect of the story. From the international opportunity to the outdoor cultivation market, there are a number of reasons to be excited about Aleafia Health and we want to highlight some of the potential catalysts for growth:
- Outdoor Cultivation: We believe that the market does not associate much value with this part of the operation nor find this to be significant. Through the outdoor operation, the company will be able to produce low-cost high-quality cannabis and we are favorable on the economics associated with the operation
- International Markets: Earlier this year, the company started selling product to the Australian market and this represented a major milestone for the business. Going forward, we expect to see the company generate more revenue from international markets and to see increasing sales to Australia and Europe
- Cannabis Derivative Products: Aleafia Health has been highly focused on the cannabis oil opportunity and this is a market that is just getting started in Canada. Through the outdoor operation, the company will be able to fuel this side of the business and create high-margin cannabis derivative products to sell to the recreational and medical market
- Strong Balance Sheet: Currently, one of the biggest concerns in the market is related to the strength of balance sheets. Aleafia Health is well capitalized and well positioned to execute on major growth initiatives. With approx. $50 million cash on the balance sheet, the company is well positioned heading into 2020 and this is something to be aware of.
A Global Growth Story to be Watching
Earlier this year, Aleafia Health completed the acquisition of Emblem and this was a transaction that we have been bullish on. Emblem is quickly proving to be an accretive acquisition and we expect to see Aleafia Health recognize significant value from the acquisition on a going forward basis. From the domestic market to international markets (especially Europe), Emblem will play a key role in the success of the operation and we believe that the market does not appreciate the leverage that this asset provides to high growth verticals in the cannabis industry.
In the coming weeks, Aleafia Health will release quarterly financial results and we expect to see strong growth reported during the quarter. Although this is something that we are excited about, we expect future quarters to show substantial growth and believe that this is the start of something big.
From a major increase in the number of medical cannabis patients to a significant increase from a production capacity standpoint, there is a lot to be excited about when it comes to Aleafia Health. The next few quarters for the business will show ramping revenues and this is a trend that we are following closely.
During the last quarter, Aleafia Health has come well off its highs and we find the valuation to be attractive at current levels. Once the company starts to show value from the outdoor operation, we expect to see the market become more excited about the opportunity and we plan to be ahead of this one.
To learn more about Aleafia Health, please reach out to email@example.com to be added to our distribution list.
Pursuant to an agreement between StoneBridge Partners LLC and Aleafia Health Inc. (ALEF) we have been hired for a period of 90 days beginning August 15, 2019 and ending November 15, 2019 to publicly disseminate information about (ALEF) including on the Website and other media including Facebook and Twitter. We are being paid $8,000 per month (ALEF) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero shares of (ALEF), which we purchased in the open market. We plan to sell the “ZERO” shares of (ALEF) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (ALEF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.